How (Not) to Sell Nuclear Weapons

Philippe Jehiel, Benny Moldovanu, Ennio Stacchetti

    Research output: Contribution to journalArticlepeer-review

    Abstract

    We consider situations where a sale affects the ensuing interaction between potential buyers. These situations are modeled by assuming that an agent who does not acquire the object for sale incurs an identity-dependent externality. We construct a revenue-maximizing auction for the seller. We observe that: 1) outside options and participation constraints are endogenous. 2) The seller extracts surplus also from agents who do not obtain the auctioned object. 3) The seller is better-off by not selling at all (while obtaining some payments) if externalities are much larger than valuations.

    Original languageEnglish (US)
    Pages (from-to)814-829
    Number of pages16
    JournalAmerican Economic Review
    Volume86
    Issue number4
    StatePublished - Sep 1996

    ASJC Scopus subject areas

    • Economics and Econometrics

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